Budget 2026: TCS cut may ease pockets of students eyeing foreign education

Lower TCS means less cash blocked upfront for medical spends and travel as well, say tax experts

The Union Budget 2026 has cut tax collected at source (TCS) on overseas remittances and tour packages to a flat 2 per cent, reducing the upfront cash burden on individuals paying for foreign education, medical treatment and travel. Tax experts say the move improves liquidity and reduces refund dependency for many households.

 

Lower upfront cash outgo

 

The rate cut directly reduces cash blockage at the time of remittance, according to Sudhir Kaushik, co-founder and chief executive officer (CEO), Taxspanner, a Zaggle company.

 

“For a ~10 lakh foreign education remittance, TCS earlier at 5 per cent was ~50,000. Now at 2 per cent, it is ~20,000, reducing immediate outgo by ~30,000. TCS is adjustable later, but it affects liquidity till then,” he explained.

 

Dipesh Jain, partner at Economic Laws Practice, noted that the biggest shift was for tour packages. “Earlier, overseas tour packages above ~10 lakh could attract 20 per cent TCS. Now, a uniform 2 per cent applies from the first rupee,” he said. On a ~15 lakh tour package, TCS will drop from ~3 lakh to ~30,000.

 

Kinjal Bhutta, treasurer at Bombay Chartered Accountants Society, concurred with another example: a ~30 lakh foreign tour earlier attracted ~4.5 lakh TCS under slab rates. At 2 per cent, it would fall to ~60,000.

 

Adjustment or refund at ITR stage

Experts emphasised that TCS is not a final tax but an advance collection linked to PAN.

 

Salaried taxpayers usually claim refunds because their tax is already covered by TDS, Kaushik pointed out. “Refund timelines can range from a few weeks to several months, depending on processing and verification. Delays often happen if TCS is not reflected in Form 26AS or AIS, or due to PAN mismatches,” he said. 

 

High TCS credits often face verification checks, stretching refunds to several months in some cases, added Niyati Shah, chartered accountant and vertical head – personal tax, 1 Finance.

 

Who gains the most?

The main beneficiaries of the cut are families funding overseas education and high-value travellers who earlier faced 20 per cent TCS, said Jain. 

 

Salaried and middle-income households with large foreign expenses will benefit most because they typically cannot fully absorb TCS against tax payable, said Shah.

 

Compliance checklist

Bhutta advised taxpayers to verify TCS entries in Form 26AS, AIS and TIS before filing returns and keep invoices, remittance proofs and purpose documents. 

 

TCS certificates such as Form 27D and bank remittance records should be preserved to avoid credit mismatches and refund delays, said Mihir Tanna, associate director, S K Patodia & Associates LLP.